586 F. App'x 604
2d Cir.2014Background
- Mount Vernon Neighborhood Health Center (Mount Vernon), a Section 330 federal grant recipient, participated in a joint venture that formed Community Choice Health Plan of Westchester (CCHP), a prepaid Medicaid managed-care plan.
- CCHP received state Medicaid managed-care contract approval that required primary ownership by Section 330 grantees.
- Between 2003–2005 CCHP paid Mount Vernon $987,000 (the “Surplus Distributions”).
- During CCHP’s state-court dissolution, the New York Attorney General alleged the payments violated N.Y. Not-For-Profit Corp. Law § 515(a); the CCHP receiver sued Mount Vernon in state court seeking recovery.
- Mount Vernon removed the state action to federal court invoking 28 U.S.C. § 1442 (federal officer/federal-title removal). The district court remanded for lack of subject-matter jurisdiction; Mount Vernon appealed.
- The Second Circuit affirmed, holding Mount Vernon failed to satisfy either § 1442(a)(1) (acting under a federal officer) or § 1442(a)(2) (title derived from a federal officer and a federal-law validity challenge).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal was proper under 28 U.S.C. § 1442(a)(1) (acting under a federal officer) | Veneruso: case belongs in state court; federal-officer removal not met. | Mount Vernon: as a Section 330 grantee subject to federal regulation, it acted under HHS/CMS when it received the Surplus Distributions, so § 1442(a)(1) permits removal. | Court: Rejected. Mount Vernon showed only regulatory oversight/compliance, not that it performed acts at the direction of a federal officer or that federal authority caused the challenged payments. |
| Whether removal was proper under 28 U.S.C. § 1442(a)(2) (title derived from a federal officer and suit challenges federal law) | Veneruso: suit seeks enforcement of state law; does not attack federal law or its validity. | Mount Vernon: contends its title to funds traces indirectly to CMS approval of CCHP’s Medicaid contract, so § 1442(a)(2) applies. | Court: Rejected. Even assuming title derivation, the suit does not challenge the validity of any federal law; it asserts state-law claims about unlawful distributions. |
| Whether the appeal is reviewable despite § 1447(d) limits on remand review | Veneruso: remand not reviewable unless proper § 1442 removal cited; argue dismissal if frivolous. | Mount Vernon: invoked § 1442 on appeal so review available. | Court: Proceeded to review because Mount Vernon’s § 1442 invocation was not so frivolous as to strip appellate jurisdiction, but ultimately found removal meritless. |
Key Cases Cited
- Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224 (statutory limits on appellate review of remand orders)
- Watson v. Philip Morris Co., 551 U.S. 142 (scope of "acting under" federal officer is liberal but limited; compliance alone insufficient)
- In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112 (three-part test for § 1442(a)(1) removal and causal-connection requirement)
- Issacson v. Dow Chem. Co., 517 F.3d 129 (removal where actions occurred because government asked defendants to do so)
- Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336 (general limits on appellate review of remand)
- Shapiro v. Logistec USA, Inc., 412 F.3d 307 (appellate review of remand when § 1442 invoked)
- Three Lower Counties Cmty. Health Servs., Inc. v. Maryland, 498 F.3d 294 (background on Medicaid federal-state interaction)
- Town of Stratford v. City of Bridgeport, 434 F. Supp. 712 (federal-title removal requires plaintiff’s suit to challenge validity of federal law)